Question

1. What are the five main strategic options for entering foreign markets? Which of these can a company choose when it wishes to benefit from the knowledge of a local foreign organization? What are the risks of this approach?

Answer 1

Five main strategic entry modes into another country for a business can be considered to be:

EXPORTING
The company an essentially export their products to the target country with the help of third-party logistics and retailers in order for them to enter the market when there are cost constraints over a company, or when they would like to test the volatility of the market.

FRANCHISING
A company can essentially franchise their product line, their business model and their expertise to another company operating in the maker in return of royalty being paid for their services. It allows a company entered into a foreign market as well as the company can make their brand name known in the target market.

ACQUISITION
A large company can acquire a smaller one in the target market, making use of its logistical and business network to add it to their own supply chain. This helps them get started quite easily in the market, with a little rebranding of the business.

MERGER
2 large companies can essentially merge to form a third entity which would have the best points from both the companies, allowing them to adhere to the values of the competition more.

GREENFIELD OR STARTING FROM SCRATCH
A company can essentially start endeavor from scratch, building their structure and functions as per their specifications. This provides a greater degree of control for them since they have the ability to create all the necessary aspects of their business and they can even create a similar business structure to one which they already have.

With the knowledge of the market, a large budget and a competent strategic plan, the best benefits could be gained from a Greenfield investment or merger. While for smaller companies with the lower budget, it would be better served by either franchising, acquisition or even exporting, depending on their need for control and requirement in terms of the plan for the market.